Automakers Are Global Companies, Not National

During the presidential campaign and following the election, Donald Trump has put forward a steady stream of economic nationalist rhetoric, with threats of tariffs and trade agreement shutdowns. Trump has paid particular attention to the auto industry, making Ford and GM his primary targets.

The idea of these two American companies producing cars in Mexico and selling them in the U.S. seems to cause him considerable annoyance and he has tried to harangue them into shifting their production back to the U.S.

Despite Ford’s announcement today that it would cancel a planned Mexican factory, some of the victories Trump claims in this regard may end up being short-lived.

This state of affairs is not part of some inevitable downside of globalization. Rather, it has enormous benefits.

What if other governments begin pressuring their companies to not open factories in the U.S.? Will U.S. companies be at a disadvantage against their foreign competitors that have greater flexibility to produce wherever is most efficient?

But, there is a larger issue at play related to how companies operate in today’s globalized world. One hundred years ago, it may have been accurate to think of Ford and GM as American companies. They produced and sold almost all of their cars in the United States.

That world is long gone, however, for these companies and their competitors as well. As I pointed out last year, Ford, Toyota and the like are global companies.

They produce and sell all around the world. Total U.S. employment for Ford is about 43,000 in the manufacturing sector, but Ford employs 123,000 people worldwide in 51 different production facilities.

As for Toyota, while there are 16 Japanese production facilities and about 70,000 Japanese employees, Toyota has overseas employment of about 166,000.

This state of affairs is not part of some inevitable downside of globalization. Rather, it has enormous benefits.

It means these companies can produce and sell cars more effectively, with highly efficient, integrated production around the world. The result is that consumers get higher quality products at a better price.

Despite Ford’s announcement today that it would cancel a planned Mexican factory, some of the victories Trump claims in this regard may end up being short-lived.

What if other governments begin pressuring their companies to not open factories in the U.S.? Will U.S. companies be at a disadvantage against their foreign competitors that have greater flexibility to produce wherever is most efficient?

But, there is a larger issue at play related to how companies operate in today’s globalized world. One hundred years ago, it may have been accurate to think of Ford and GM as American companies. They produced and sold almost all of their cars in the United States.

That world is long gone, however, for these companies and their competitors as well. As I pointed out last year, Ford, Toyota and the like are global companies.

They produce and sell all around the world. Total U.S. employment for Ford is about 43,000 in the manufacturing sector, but Ford employs 123,000 people worldwide in 51 different production facilities.

As for Toyota, while there are 16 Japanese production facilities and about 70,000 Japanese employees, Toyota has overseas employment of about 166,000.

This state of affairs is not part of some inevitable downside of globalization. Rather, it has enormous benefits.

It means these companies can produce and sell cars more effectively, with highly efficient, integrated production around the world. The result is that consumers get higher quality products at a better price.